Credit union 'common bond' upheld.

The National Credit Union Administration's liberal interpretation of the "common bond" that unites credit union members was upheld by a federal judge on Thursday.

"The NCUA's interpretation of the common-bond provision is a reasonable construction of an ambiguous statute," said U.S. District Judge John H. Pratt in an 12-page decision.

Judge Pratt handed down his decision less than a week after oral arguments in the four-year old First National Bank v. NCUA, which were held Sept. 9 in the U.S. District Court for the District of Columbia.

Bankers will appeal, vowed Michael Crotty, deputy general counsel for litigation at the American Bankers Association, which backed four North Carolina banks in the suit.

"Tell my friends on the credit union side to enjoy it while they can," he said. Judge Pratt said the common bond was intended to help foster the creation of credit unions, not to limit them.

"The common bond provision was not an end in itself, but its purpose was to support the underlying policy of promoting stable credit unions," he wrote. "It also suggests that Congress intended a flexible interpretation of the provision. This assumption is supported by the fact that Congress has not objected" to the agency's liberal interpretation of the statute, in effect since 1982.

NCUA Chairman Norman E. D'Amours agreed. "The result is fully consistent with our view that the common bond, while important, isn't a quintessential part of the credit union movement," he said. "Bankers have tried to fuzz that issue and they've lost."

Judge Pratt also rejected the bankers' argument that NCUA's policy contradicts congressional intent simply because it represented a dramatic break from precedent.

The case dates back to 1990 when four North Carolina banks and the ABA sued the NCUA for letting AT&T Family Federal Credit Union enroll employee groups unrelated to its original sponsor. The bankers contended that the regulator was violating the Federal Credit Union Act.

The dispute pitted two rival interpretations of a passage of the 1934 law that says, "Federal credit union membership shall be limited to groups having a common bond of occupation or association."

Bankers charged the statute permitted a credit union to have only one sponsor.

The regulator based its defense on the use of the plural "groups." It said the wording either indicated Congress meant for credit unions to have multiple sponsors, or was ambiguous enough to justify its interpretation under legal precedent.

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